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Trading process

Pre-trade context

In practice, the usual approach is for the environmental authority to place limits on pollutant discharge from point sources polluters (e.g. industrial plants) . For nonpoint source (e.g. farmers), the current discharges from their lands are taken as the allowed loading; they can receive credits if implementing best management practices (BMP) to reduce the discharge below the current levels. As for point sources, they can also receive credits if reducing discharge below the mandated levels. Point sources are allowed to meet the requirement either by implementing wastewater treatment practices (WTP) or buying credits from other polluters in the same watershed. One credit represents one pound of pollutant discharged from a point source.

The objective of point sources is to meet the required discharge at the lowest cost by choosing among available wastewater treatment practices and/or buying credits on the market:

-- Point source: Compliance cost = Cost of buying credits + Cost of implementing WTP

Nonpoint sources, on the other hand, try to maximize their profits by choosing which BMPs to implement and selling credits:

-- Nonpoint source: Profit = Revenue from selling credits - Cost of implementing BMP

In NutrientNet, the instructor will create a market with students playing the roles of point sources and nonpoint sources. These roles are automatically assigned. After a log-in, participants will access their own page and know the characteristics of source assigned to them. The trading process is then ready.

Trading process in NutrientNet

The trading process includes two main components: information search and decision making. In NutrientNet, participants can access to the market at any time to get information on current supply and demand of credits. They will know the prices that credits have been bought and sold in the market and then make decisions on how many credits to sell/buy and at what price. Three market activities are available in NutrientNet: placing an offer (to sell/buy), bargaining, and accepting offers.